Virgin America Announces EleVAte Redemption Levels and More

Fares, Frequent Flier Programs, Virgin America

It has been a very busy start to the month of October for Virgin America. So far, they’ve rolled out point redemption in the EleVAte frequent flier program, launched Main Cabin Select, added refundable fares, introduced a credit card, and started looking for even more money. Whew. Let’s look at some details on what they’ve been up to.

EleVAte Points Redemption
It *only* took them 15 months, but the airline has finally brought out a redemption plan for its frequent flier program. The structure seems to make a lot of sense to me in that it’s based on how much you spend, but there are issues in my opinion.

First, you earn 5 points for every dollar you spend on the BASE FARE. Taxes and fees annoyingly don’t count. I’d rather see 4 points per dollar for all dollars spent than 5 just for the base fare. It makes it harder to figure out how much you’re going to earn instead of just being able to look at how much you’re putting on your credit card.

But that’s just on the earning side. Let’s talk redemption. The airline makes it clear that you can redeem points for any flight with seats available in any cabin, but they reserve the right to change the redemption amounts depending upon demand. A quick look shows that they seem to multiply the displayed one way fare by about 46.5 to determine how many points you’ll need. So, a flight from LAX to JFK that costs $149 each way will go for 6,930 points while a $549 flight will cost you 24,372 points. They do make it easy to use the website to see how many points would be necessary.

My only problem here is that it’s not very transparent. It makes it hard to set a goal for how many points you need to save up for a flight, because you don’t know what you’ll need until the time of booking, and that can be annoying. But that being said, it’s still a frequent flier program that’s easy to explain to people, and that’s a good thing.

So let’s look at an example to get an idea of what the value is here. I pulled up LAX to JFK from Nov 11 to Nov 13. All nonstop flights were a low $149 each way or 6,930 points. So, if you spend roughly $3,000 in travel ($2,772 plus tax), you can get enough points for one free roundtrip ticket on those off peak flights.

Of course, it’s apples and oranges to compare this to another airline program because there are so many variables, but let’s assume that we’re talking about someone who exclusively flies LAX to JFK roundtrip. You would need about 5 roundtrips to get enough miles to get one for free. That would be mean you’d have to pay an average of $600 roundtrip to get the same value on another airline that you would get from Virgin America. You can probably do better than that.

Main Cabin Select and Refundable Fares
The refundable fare thing is no surprise. It took JetBlue a few years to realize that there was demand for the product and Virgin America caught on more quickly. So I won’t spend much time focusing on that; let’s talk Main Cabin Select.

As promised, the product is now ready to go, but I am absolutely shocked at the HUGE spread between regular coach and Main Cabin Select. Remember those $149 one way flights I looked at before? To get a little more legroom you’d have to pay $484 one way. Are you friggin’ kidding me?!? When we look at Thanksgiving, a $434 one way in coach would cost $679 in Main Cabin Select. This seems extremely pricey to me for what you get.

At least they’ve reduced the spread on shorter haul flights. A $101 seat from LAX to SFO in coach will only be $189 in Main Cabin Select, but that’s still a pretty hefty pricetag for such a short flight. I think they’re likely pricing themselves out of the market here. The idea isn’t a bad one, but prices are going to have to adjust.

Barclay’s Virgin America Signature Visa Card
There is one big benefit with this card . . . no annual fee. So, if you plan on flying Virgin America, you can basically get free points with this card, and that’s not bad. You’ll also earn 1 point per dollar spent, as you do with most airline cards. That can actually make the Virgin America eleVAte program much more lucrative.

In this case, you can compare airlines because the earning is effectively the same. If I spend $10,000 on my AAdvantage Visa, I get 10,000 points in AAdvantage. If I spend $10,000 on my Virgin America card, I get 10,000 points in Virgin America’s program. And since I can get a roundtrip from LAX to New York for as little as 14,000 points, that $10,000 of spend on my credit can go a lot further. Of course, if you wanted to use it for First Class, it would be a lot better to use your AAdvantage card instead. It just depends what matters to you. If you just want to get yourself across the country for the least amount possible, this is the way to do it.

Looking for More Funding
I promise, this is the last thing I’m going to talk about today. I could probably republish this post as a book. There was an article in the Financial Times saying that Virgin America is looking to raise even more money. In the same breath, they say that load factors are above 80% and they’ll be profitable by the second quarter of next year. Really?

The 80% load factor thing isn’t that impressive if you’re talking about summer loads. Unfortunately they won’t tell us how they’re doing financially, so we don’t know if people are paying more than $149 for those cross country flights. But the fact that they need more money only six months after securing an additional $100 million isn’t a good sign. I suppose it’s possible they just want to store up cash while they can . . . . If the money is cheap and there for the taking, that’s a smart move right now.

Unfortunately, however, we won’t know the reasons here, because they continue to fight the DOT on the requirement to release their quarterly financial data publicly. I know all their arguments, but the bottom line is that people often have to buy tickets fairly far in advance when they fly, and they want to have a good idea that their airline will still be around when it comes time to fly. Until Virgin America starts playing by the rules again (or I should say, until the DOT finally rules on the appeal), we won’t really know much about the financial state of the airline. I’d imagine it’s fine for the foreseeable future, but I really don’t know.

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15 comments on “Virgin America Announces EleVAte Redemption Levels and More

  1. Cranky, I find your comparison of frequent flyer benefits confusing, so let me try a different approach.

    On a legacy airline you need about 5 roudtrip transcontinental flights to get a free flight on the same route. Assuming the cost is the same, you get about 20 cents’ worth of benefits for every dollar you spend.

    According to your calculation, a VX point is worth about 2 cents, and you get 5 points per dollar for a total benefit of 10 cents per dollar spent.

    Of course, the VX benefit is pretty much the same wherever you earn and spend it, while the legecy benefit above is calculated under near-optimal conditions so it should be discounted. This brings the two benefits to be roughly equivalent, or at least within the same general range.

    Now, what if an airline just said that for every dollar you spend you get 10 cents in credit towards a future flight? This would be easy and transparent.

  2. Ron – It’s definitely tough to make a strong comparison here. You make a big assumption by saying that the cost is the same. That’s likely not to be the case, and it can vary wildly depending upon availability. So, it’s a very difficult comparison.

  3. Hey Cranky,

    A while back I asked whether I should fly Alaska or Virgin America from LAX to Seattle. I’m in Seattle right now and I chose Virgin. Let me tell you – it was the best decision I could have made. I am usually an AA flyer, with tons of miles on their AAdvantage program. BUT, VX won me over…with lots of little things. Like when I was standing at the check-in trying to figure out where my gate was, a kind check-in agent noticed, CAME AROUND THE COUNTER and asked me if she could help with something. Their check-in counters at the gate are super cool and hip, and the plane really does feel like the lobby of a W Hotel – tres chic.

    And the Red IFE system is truly amazing.

    I fully intend on flying VX any time I can on their routes. I’m a bit concerned about your assessment that they may be in some financial trouble, but I truly hope they make it. I’m sold!

  4. It will be interesting to see how things change with a defined award program now in place. This may attract a few fliers who have been waiting on the side until a way to redeem came around. For myself, I’m going to stay on the side and keep watching. Until VX convinces me they are financially sound I’m not willing to make the investment in a new airline’s award program.

  5. Amen, Brothah regarding the overpriced Main Cabin select. I happily paid the premium for exit row seats under the old plan (what was it, $50, $80? I can’t remember, but it was no big deal), but this is insane. What are they thinking? All we really want is the legroom. Who cares about the other fluff? Come on VX! Give the tall folks a break here.

  6. Artie – Well, I have no idea if they’re in financial trouble or not since they won’t release info, but you can draw your own conclusions about them going back for more money yet again. Glad you had a good experience on them. The one time I’ve flown them, I had nothing but good things to say as well.

  7. What Ron suggests is basically how the American Express Blue Sky program works. One point per dollar spent, 7500 points can be redeemed for a $100 credit towards a travel purchase made with the card (airfare, hotel, car rental, cruse, tour operator, etc).

  8. Main cabin select sounds outrageous, especially considering on my last VX flight from IAD-LAX they were heavily pushing upgrades from any coach fare to first for $250. Even with that offer, first went out with 5/8 seats empty. I think they will be hard pressed to sell a coach seat with a meal, a little more legroom, and a couple other perks for $260 to $345 more.

  9. VX Main Cabin Select, SEA-LAX: $249
    VX First Class, SEA-LAX: $254

    Er… so it’s $5 more for a better seat and better food?

    Something tells me they haven’t thought the pricing out for this very well on some of their routes.

  10. axel – I used to work at that building. It’s called The Tower and is at 10940 Wilshire. PriceGrabber actually moved last month closer to LAX, but I’m no longer with PriceGrabber. I didn’t mention it on the blog, but I was laid off in September and I’ve been focusing full time on Cranky and some other projects.

  11. David M — the Blue Sky from American Express gives you 1.33 cents per dollar spent, and you have to spend it in $100 increments and only on travel? The Blue Cash gives you cash, no restrictions, at a rate of 1.5 cents per dollar after the first $6,500 you spend in a year, and 5 cents per dollar on groceries and gas (for the first $6,500 it’s 0.5 cents and 1 cent per dollar). If you never use your card for gas or groceries then the cards even out at $39,000, but if just 20% of your card spendings are on gas and groceries then they even out at $11,000, and with 50% on gas and groceries then they even out below $8,500 (per year). So I find Blue Cash to be a better deal.

    But anyway, the rewards from airline loyalty programs appear to be substantially higher. Cranky is right that both earning and redeeming vary wildly, but I think something like 10 cents per dollar in terms of value to the customer is a fair overall estimate. I think airlines can offer this because the cost to the airline is much less than the value to the customer, given that they carry a lot of empty and non-revenue seats anyway.

  12. When it comes to Main Cabin Select, I’m also surprised they are charging such a crazy premium. Seat Guru says they used to charge $25 to pre-book these same seats – anyone able to confirm this?
    If so, I find it hard to justify paying 2-3 times the price (on an LAX/JFK flight) for the same seat that used to be $25. Plus you have to deal with no under-seat storage in the bulkhead rows, and some seats that don’t recline??
    You’d have to consume a LOT of food, drinks (and alcohol?) to make up for that.

  13. Does anyone have any info about the points transfer options for Virgin America? I have been trying for two days to transfer points to buy a pair of tickets. The system either tells me that the functionality isn’t available (but it’s clearly part of the Elevate program now), or my credit card(s) are denied, which isn’t possible, all of my cards are ok. I have spent over five hours on the phone with several VX Elevate employess and THEY don’t know what’s wrong. They want me to call, who runs the backend of the system. It’s absolutely unreal. As days pass, my chances of using points diminish. No one at VX is able to help me. I’ve written guest relations and I await an answer. I’ve written them before and never heard back. I expect the same in this case. I already have about 7 $40 charges on my Visa bill and 3 or so on my Amex showing that the transfer fees were ok’d but the Elevate system says there’s an error. It’s insane, I tell you. Of course, all CC charges will be erased eventually. What a joke.

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